Russian central bank slashes key rate to 11%, sees room to cut further

Russia’s central bank lowered its key interest rate to 11 per cent on Friday and said it saw room for more cuts this year, as inflation slows from more than 20-year highs and the economy is about to contract.

It announced the move at an extraordinary meeting after cutting the key rate to 14 per cent in April, weeks after an emergency rate increase to 20 per cent triggered by Russia’s move to send tens of thousands of troops into Ukraine on February 24.

The central bank, which has now slashed its key rate by a cumulative 900 basis points since February, said it “holds open the prospect of key rate reduction at its upcoming meetings.” “Inflationary pressure eases on the back of the rouble exchange rate dynamics as well as the noticeable decline in inflation expectations of households and businesses,” the bank said in a statement.

The rouble has become the world’s best-performing currency this year, buoyed by capital controls that Russia imposed in late February to cap financial stability risks and defend itself against sweeping western sanctions.

The central bank said external conditions for the Russian economy are still challenging but financial stability risks have somewhat decreased, opening room for easing of some capital control measures.